White House Offers a Menu of Tax Increases in Search of a Debt Deal
“There are a variety of measures that have to do with simplifying the tax code and ending unnecessary, unjustifiable loopholes and subsidies that simply, as -- the oil and gas subsidy is a perfect example of this -- that in this time, for the oil and gas industry, when they’ve had record profits, doesn’t make any sense I think to almost any American.”
-- White House Press Secretary Jay Carney briefing reporters.
The White House has started the public phase of negotiations on obtaining a debt ceiling increase from Republicans and deficit-anxious moderate Democrats. It’s the latest sign that President Obama is feeling the heat on the deal
What the president wants is some kind of a tax increase so that he can keep his political base hushed up and get the debt hike passed quickly.
Remember, for a president whose greatest liability is a deteriorating economy, the uncertainty and worry in the business and finance sectors that would be caused by brinksmanship could outweigh the political benefits of taking Republicans to the edge and calling them obstructionists and radicals.
The closer to the brink Obama takes the negotiations, the better deal he can get, but the greater chance for catastrophe and the perception that the Washington he promised to reform is more badly broken than ever.
Obama gave some halfhearted support to the idea of a grand tax compromise, the kind of deal where rates drop but loopholes close, as was done in Ronald Reagan’s second term. There seems to be little hope for such a deal with only 35 days until the deadline imposed by the Treasury Department for beginning a government shutdown.
(If there’s no deal by Tuesday watch for the administration to turn up the heat with warnings about service disruptions, default, etc. with exactly four weeks to go.)
Here are the tax hikes the administration put on offer just before Obama’s meeting with Senate Minority Leader Mitch McConnell:
-- A change to corporate accounting practices for valuing inventories and expenses, thereby limiting deductions and increasing corporate taxes.
-- Eliminating some of the personal deductions for charitable giving by high-income earners, about $300 billion over 10 years.
-- Ending all oil- and ethanol-specific tax breaks.
-- Taxing the earnings of venture capitalists and hedge fund managers as personal income not capital gains.
While congressional Democrats are still talking about increasing rates for upper income earners, it’s pretty clear there is no chance of undoing Obama’s deal with McConnell on maintaining the current tax rates for two years.
But the four tax increases put forward by the administration aren’t minor considerations. One would be hugely expensive to businesses large and small because it would not allow them to normalize the value of commodity prices as markets fluctuate. Another would do serious damage to the non-profits that provide much of the social safety net.
But what is the president willing to trade away in order to make tax increases part of the plan?
Sens. Tom Coburn, R-Okla., and Joe Lieberman, I-Conn, are hoping to give Obama a way to deal with the rapidly bankrupting Medicare entitlement by offering a $500 billion cuts package that would not only make money available for a debt deal but shore up the program.
It’s not likely that Democrats would go for anything like that since the majority in that party have made the sacrosanctity of Medicare a pillar of faith (and the key to winning back the House and retaining the Senate).
The president is on a campaign trip to Iowa today, but you can bet that aside from donor calls and national security fretting, he will be looking for any way to get Democrats to agree with something – anything – that gives him enough cover on entitlement reform that he can insist on some kind of tax increase. Maybe not Coburn-Lieberman, but something.
The president needs an outcome like what he had on funding the government for the current fiscal year in which he held off many Republican demands, but still got credit for being a compromiser.
He also needs to avoid the kind of situation he had on the tax rate negotiations in December when his base screamed that he caved too soon and gave up too much. The markets liked Obama’s willingness to yield, but it made him look weak and then petulant when complaining about how Democrats didn’t appreciate how hard it had been.
Palin, Obama Both Sort of Campaigning in Iowa Today
"Iowa is clearly a special place for the president. He spent a significant amount of time there and really got to know a lot of people across the state when he was running."
-- Deputy White House Communications Director Jen Psaki explaining to the Associated Press why the president’s trip to Iowa today is about the economy, not politics.
She arrives as a former governor, an object of media fascination, a former reality show star and the guest of honor at a movie premiere of a new biopic and not a candidate for president… at least not yet, anyway.
Obama arrives with sagging job approval numbers and daunting prospects for winning the state in 2012 as Iowans increasingly see his economic policies as inadequate or detrimental to the situation he inherited.
Rather than a clash of the titans, Obama and Palin will be in opposite sides of the Hawkeye State taking more tentative steps toward the coming conflagration of 2012.
Palin is coming to Pella for the premiere of “The Undefeated,” which chronicles her rise to prominence. She remains The Undecided when it comes to her own potential presidential candidacy, despite the best efforts of a small but fiercely loyal group of supporters that is trying to draw her into the race.
Despite their ardent hopes and the best efforts of the political press to draw Palin into a feud with Michelle Bachmann (or anyone else at hand), Palin has continued to chart exactly her own course.
Obama is heading to the Quad Cities as part of his effort to hype U.S. manufacturing. He has been burning up the runways in swing states – North Carolina, Pennsylvania, Florida, etc. – of late on official visits, usually holding official events on the economy.
Not only does it get the president road blocked coverage in the local press on the defining issue of his re-election at no cost to his campaign, but by keeping it official, Obama shields himself from (some) questions about the property of campaigning at a time when there is so much work to be done in Washington.
Anyone from the establishment press who complains can be upbraided for questioning the validity of trying to put Americans back to work.
It Depends On What The Meaning of the Word “Hostilities” Is
“We are not saying the War Powers Resolution is unconstitutional or should be scrapped or that we can refuse to consult Congress. We are saying the limited nature of this particular mission is not the kind of ‘hostilities’ envisioned by the War Powers Resolution.”
Congress is still steaming over the Obama administration’s refusal to accept Congressional authority over U.S. involvement in the bloody, stalemated Libyan civil war and members will have a chance to vent today.
The object of their great, hot gusts will be Harold Koh, the Yale Law School dean who serves as the lawyer for the State department and will appear before the Senate Foreign Relations Committee to explain just how hostile a conflict has to be before the president believes he must seek Congressional approval.
It’s a symbolic moment for President Obama and the anti-war movement that launched his rise to the White House. Koh’s own professional success is in large part attributable to his efforts to constrain past presidents from the exercise of military power. His legal efforts to derail George W. Bush’s interventionist foreign policy played no small part in his selection as the current dean of the Yale law school (he is on sabbatical to serve as the top lawyer to Hillary Clinton, the top proponent of the Libya intervention).
While Koh’s clout on the subject might help put some on the left more at ease with the unauthorized, open-ended commitment to the western tribesmen and Islamists trying to take over the oil-rich North African nation, trading on that past credibility to support such a war effort shows the pass to which the president and the movement have come.
Koh has damaged his own credibility with the assertion that Congress is irrelevant in this war because U.S. troops aren’t at risk – that the president can make war as he chooses, so long as it can be done by remote control and high altitude.
Koh today will face a brutal grilling from the ranking Republican on the committee, Sen. Dick Lugar of Indiana, a onetime foreign policy supporter of Obama who has turned into a harsh critic as the president’s interventionist streak has widened. Republicans Jim DeMint, Marco Rubio, Mike Lee and John Barrasso will join him in a chorus of boos.
Chairman John Kerry, the most ardent supporter of the war in the Senate, will also struggle to keep Democrats Jim Webb, Chris Coons, Dick Durbin and Tom Udall from pushing Koh into even greater rhetorical contortions.
And Now, A Word From Charles
“Even if you did the defense cut, defense cut is $50 billion. You could do that for 30 years, that $50 billion. You could collect all of that money. It wouldn't recover one year of Obama deficit spending. That is not where the money is. The money isn't in that or the oil, or the tax breaks the oil companies are getting, which is $2 billion a year. The money is in entitlements.
And unless Democrats are willing to do something important on entitlements, we won't get anywhere on this. That, I think, is the ultimate redline. I think Obama decided he doesn't want to touch entitlements in a significant way, because demagoguing entitlements and Medicare is the way he gets re-elected.”